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Court File No. CV-17-11846-00CL ONTARIO SUPERIOR COURT OF

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Court File No. CV-17-11846-00CL ONTARIO SUPERIOR COURT OF Court File No. CV-17-11846-00CL ONTARIO SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST) IN THE MATTER OF THE COMPANIES’ CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF SEARS CANADA INC., 9370-2751 QUÉBEC INC., 191020 CANADA INC., THE CUT INC., SEARS CONTACT SERVICES INC., INITIUM LOGISTICS SERVICES INC., INITIUM COMMERCE LABS INC., INITIUM TRADING AND SOURCING CORP., SEARS FLOOR COVERING CENTRES INC., 173470 CANADA INC., 2497089 ONTARIO INC., 6988741 CANADA INC., 10011711 CANADA INC., 1592580 ONTARIO LIMITED, 955041 ALBERTA LTD., 4201531 CANADA INC., 168886 CANADA INC., AND 3339611 CANADA INC. BOOK OF AUTHORITIES OF THE MONITOR (Transfer Under Value Claim Motion) (returnable December 3, 2018) November 20, 2018 NORTON ROSE FULBRIGHT CANADA LLP Royal Bank Plaza, South Tower 200 Bay Street, Suite 3800, P.O. Box 84 Toronto, Ontario M5J 2Z4 Orestes Pasparakis, LSO#: 36851T Tel: +1 416.216.4815 Virginie Gauthier, LSO#: 41097D Tel: +1 416.216.4853 Alan Merskey, LSO#: 41377I Tel: +1 416.216.4805 Evan Cobb, LSO#: 55787N Tel: +1 416.216.1929 Fax: +1 416.216.3930 [email protected] [email protected] [email protected] [email protected] Lawyers to the Monitor, FTI Consulting Canada Inc. Court File No. CV-17-11846-00CL ONTARIO SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST) IN THE MATTER OF THE COMPANIES’ CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF SEARS CANADA INC., 9370-2751 QUÉBEC INC., 191020 CANADA INC., THE CUT INC., SEARS CONTACT SERVICES INC., INITIUM LOGISTICS SERVICES INC., INITIUM COMMERCE LABS INC., INITIUM TRADING AND SOURCING CORP., SEARS FLOOR COVERING CENTRES INC., 173470 CANADA INC., 2497089 ONTARIO INC., 6988741 CANADA INC., 10011711 CANADA INC., 1592580 ONTARIO LIMITED, 955041 ALBERTA LTD., 4201531 CANADA INC., 168886 CANADA INC., AND 3339611 CANADA INC. BOOK OF AUTHORITIES OF THE MONITOR (Transfer Under Value Claim Motion) (returnable December 3, 2018) TABLE OF CONTENTS Authority TAB DESCRIPTION 1 Verdellen v. Monaghan Mushrooms Ltd., [2011] ONSC 5820 (Ont. S.C.J.) 2 Cash Store Financial Services (Re), [2014] ONSC 4326 (Ont. S.C.J.) 3 Tucker v. Aero Inventory (UK) Limited, [2011] ONSC 4223 (Ont. S.C.J.) 4 Century Services Inc. v. Canada (Attorney General), [2010], 3 S.C.R. 379 5 Ernst & Young Inc v Essar Global Fund Limited, 2017 ONCA 1014 6 Armoires de cuisine de Montréal ltée (Re), [1983] J.Q. no 192 7 Indcondo Building Corp. v. Sloan, [2014] ONSC 4018 (Ont. S.C.J.) 8 Nortel Networks Corp. (Re), [2009] O.J. No. 3425 (Ont. S.C.J.) 9 Puratone Corp. (Re), [2013] M.J. No. 247 (Man. Q.B.) 10 Timminco Ltd. (Re), 2012 ONSC 2515 11 Canwest Global Communications Corp. (Re), [2009] O.J. No. 5379 -2- Secondary Sources TAB DESCRIPTION 12 Office of the Superintendent of Bankruptcy. “Bill C-12: Clause by Clause Analysis-Clause No. 78, s. 36.1 of the CCAA”, (24 March 2015), online: SME research and statistics <https://www.ic.gc.ca/eic/site/bsf- osb.nsf/eng/br01986.html#a86> TAB 1 Page 1 Case Name: Verdellen v. Monaghan Mushrooms Ltd. Between Jack Verdellen, Applicant, and Monaghan Mushrooms Ltd., Pricewaterhousecoopers Inc., Respondents [2011] O.J. No. 4489 2011 ONSC 5820 97 C.P.R. (4th) 196 Court File No. CV-11-9162-CL Ontario Superior Court of Justice Commercial List F.J.C. Newbould J. Heard: September 27, 2011. Judgment: October 7, 2011. (49 paras.) Intellectual property law -- Patents -- Ownership -- Transfer or assignment -- Application by Verdellen for declaration of ownership of patent rights dismissed -- Applicant claimed agreement with former employer conferred rights outside of North America in respect of horticultural invention -- Former employer subsequently sought creditor protection and was sold to respondent -- Even if enforceable agreement was proven, it conferred equitable rights to applicant rather than legal rights -- Agreement was void, as respondent took title to rights as bona fide purchaser for value without notice of applicant's claimed interest -- Otherwise, no protection conferred to respondent under s. 51 of Patent Act regarding rights outside of Canada -- Patent Act, s. 51. Application by Verdellen for a declaration of ownership of patent rights. The applicant was a consultant formerly employed by Rolland Farms, a company placed under creditor protection in December 2008 and subsequently sold to the respondent, Monaghan Mushrooms, in September Page 2 2009. The sale closed in November 2009 under an amended vesting order dated October 2009. The applicant claimed ownership of patent rights outside of North America for the invention of a method of inhibiting green mould in mushrooms. The applicant relied on an oral and written agreement reached with Rolland in December 2008, one week prior to the initial creditor protection order. The applicant claimed that he and the president of Rolland orally agreed he would own the rights of whatever he invented provided Rolland was able to receive the benefits of the rights in North America. He claimed that the agreement was reduced to writing when he informed the president of his intent to leave the company. A copy of the agreement was dated three days after Rolland received a notice of intention to enforce security by a creditor. The respondent submitted that the applicant was unable to establish an enforceable agreement with Rolland due to lack of agreement on essential terms, an absence of consideration, and no evidence of communication of acceptance. The respondent submitted that it acquired the patent rights in question in good faith for value without notice of any rights of the applicant under a court-ordered process in which it received a vesting order. The respondent submitted that if an agreement existed, it was void under s. 51 of the Patent Act and as a preference under s. 95 of the Bankruptcy and Insolvency Act. HELD: Application dismissed. It was not possible to determine the existence of a binding agreement due to contested factual issues incapable of resolution on an application. Assuming a binding agreement existed, the agreement on its wording conferred equitable rights to the applicant rather than legal. The wording of the agreement of purchase and sale and the vesting order clearly covered the worldwide patent rights for the invention in question. The respondent purchased the rights for value without notice. The publicly available information regarding ownership of the invention and any related patent information disclosed Rolland as the owner. The respondent's due diligence prior to closing was consistent with the publicly available information. At no time was the respondent aware of any interest of the applicant in the patent rights. Any purported agreement between Rolland and the applicant was void, as the respondent took title to the patent rights free and clear of any equitable interest of the applicant. No protection was conferred to the respondent under s. 51 of the Patent Act involving patent rights outside of Canada. The respondent had no status to void the agreement as a preference under s. 95 of the Bankruptcy and Insolvency Act. Statutes, Regulations and Rules Cited: Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, s. 38, s. 95 Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36, s. 36.1 Patent Act, R.S.C. 1985, c. P-4, s. 49, s. 50, s. 51 Patent Rules, s. 59 Counsel: Patrick J. Cotter, for the applicant. Page 3 Paul J. Martin and Sarah J. Armstrong, for the respondent Monaghan Mushrooms Ltd. T. Van Klink, for the respondent PricewaterhouseCoopers Inc. 1 F.J.C. NEWBOULD J.:-- The applicant Jack Verdellen applies for a declaration that he is the owner of certain patent rights outside of North America for an invention which involves a method of inhibiting green mould in mushrooms. The invention was said to have occurred while Mr. Verdellen was employed by Rol-land Farms Limited ("Rolland"). Mr. Verdellen claims ownership under an agreement between him and Rolland said to have been negotiated orally and put in writing dated December 1, 2008 2 Rolland applied for protection under the CCAA on December 10, 2008 and the Initial Order was made that day. A sale process in the CCAA proceedings was undertaken and the respondent Monaghan Mushrooms Ltd. ("Monaghan") purchased the business of Rolland under an agreement of purchase and sale dated September 21, 2009. That agreement closed on November 6, 2009 under an amended vesting order dated October 27, 2009. Monaghan takes the position that Mr. Verdellen cannot establish an agreement between him and Rolland and that Monaghan acquired the patent rights in question in good faith for value without notice of any rights of Mr. Verdellen to the patent rights under a court ordered process that provided Monaghan with a vesting order. Monaghan also takes the position that if there were an agreement, it would be void under s. 51 of the Patent Act and as a preference under s. 95 of the BIA. Existence of agreement 3 Mr. Verdellen's evidence is that he commenced work at Rolland as a consultant in 1994- 1995 and became Vice-President, Production in November 2006. His evidence is that at that time, he orally agreed with Mr. Vander Pol, the president and chief executive officer of Rolland, that he would own the rights to whatever he invented provided that Rolland was able to get the benefit of the rights in North America. In July 2007 he and another Rolland employee invented materials and methods to be used for the prevention and/or control of green mould in the production of mushrooms.
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